Ask The Expert: Are Employer-Paid Gym Memberships Taxable to the Employee?

If we reimburse employees for gym memberships or fitness equipment (up to a certain amount), is this a taxable benefit to them?

ANSWER

Yes, unless an exception applies.

EXPLANATION

Paying all or a portion of an employee’s gym membership is a taxable benefit, subject to 2 key exceptions:

One is where the employer holds the membership and pays a fee to the gym that provides access to all employees. This would be equivalent to the employer’s providing the gym facilities directly, which isn’t itself a taxable benefit.

The other exception is where the employer can clearly demonstrate, i.e., is prepared to defend itself to the CRA, that the employer is the one who primarily benefits (at least 50%). This can happen in several different ways. Examples: The employer benefit might be sales related such as networking and business development; or it could be part of a wellness program with a demonstrated impact on employee absences, use of extended health benefits, etc.